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Braveheart Investment Group plc
Half-Yearly Report
2016
KEY POINTS | OVERVIEW | 01
Key points
Revenue of £562,000 in the six months ended 30 September 2016 (2015: £610,000);
Profit of £475,000 in the six months ended 30 September 2016 (2015: loss of £1,039,000);
Earnings per share of 1.67p in the six months ended 30 September 2016 (2015: loss per share 3.84p);
Cash balances at 30 September of £1,334,000 (2015: £260,000); and
Commencement of new investment strategy.
Overview
01 Key points
02 Chief Executive Officer’s statement Interim Financial Statements and Notes
05 Condensed consolidated statement of
comprehensive income
06 Condensed consolidated statement of financial
position
07 Condensed consolidated statement of cash
flows
08 Condensed consolidated statement of changes
in equity
09 Notes to the Interim Financial Statements
13 Company information
Disclaimer
This half-yearly report contains certain forward-looking statements, which reflect the knowledge of, and information available
to, the directors at the date of preparation of this half-yearly report. By their nature, these statements involve risk and
uncertainty because they relate to events and depend on circumstances that may or may not occur in the future and there are a
number of factors that could cause actual results or developments to differ materially from those expressed or implied by these
forward-looking statements.
02 | OVERVIEW | CHIEF EXECUTIVE OFFICER’S STATEMENT
Braveheart Investment Group plc | Half-Yearly Report 2016
We are pleased to report to shareholders for the six months ended 30 September 2016.
Recent Investments We reported to you in our last Annual Report on 22 June 2016 that we were looking to identify new private equity investments with good growth potential and where we had an existing knowledge of the companies. We are therefore delighted to be able to report that during the period under review, and as announced on the 4 July 2016, we commenced our new investment strategy with the capital reorganisation, investment in and appointment of a director nominated by Braveheart at Paraytec Limited (“Paraytec”), which resulted in Braveheart now owning 33 per cent. of Paraytec. In addition, and as announced on the 8 July 2016, we have undertaken a similar transaction with Kirkstall Limited (“Kirkstall”) resulting in Braveheart now owning 28 per cent. of Kirkstall. We believe that the reconstruction, provision of a director and further investment in each of these companies will enable them to accelerate growth and maximize their potential.
Portfolio theory evolved as a tool to manage negative risk though diversification, which reduces the overall volatility of returns for the portfolio. However, your board believes that generating exceptional returns from the relatively limited resources available to Braveheart at this time requires a different strategy, which is to identify a small number of companies with excellent prospects and where Braveheart already has knowledge. Although concentrating our resources on a small number of projects exposes us to the risk of increased volatility of overall results, which could result in increased positive as well as negative returns, we firmly believe that our active management approach and depth of knowledge of the businesses materially skews the risk of returns towards a positive return outcome. The investments in both Paraytec and Kirkstall are representative of this new investment strategy where we are investing into leading technologies with which we are already familiar and working closely with their boards. We believe that this style of strategic investing could result in significant returns over the next few years. For reporting purposes, we are going to separate out investments made under the new investment strategy and group them under the heading “The Strategic Portfolio”. Paraytec operational update Paraytec is a scientific instrument company based in York. It has developed and patented its innovative ActiPix™ technology for optical imaging and absorbance measurements of fluid samples flowing in capillaries or fluid flow cuvettes. This technology enables researchers to measure the viscosity of drug formulations and the effective size of the active ingredients in these formulations. Paraytec’s instruments can also be used to monitor how tablets, gels and creams, release their active ingredients into liquids, including biological media, as well as across membranes such as skin. The first sales of Paraytec’s new ActiPix™ D200 system have recently been delivered and are generating a lot of interest from analytical laboratories, life science researchers in universities and the major pharmaceutical and biopharmaceutical companies. Paraytec also has two license deals: Malvern Instruments has already incorporated ActiPix™ technology into its own branded instruments and in November 2016, Sirius Analytical is expected to launch its licensed instrument at the AAPS exhibition in Colorado USA.
CHIEF EXECUTIVE OFFICER’S STATEMENT | OVERVIEW | 03
Braveheart Investment Group plc | Half-Yearly Report 2016
Kirkstall operational update Kirkstall has developed Quasi Vivo™, a system of interconnected chambers for cell and tissue culture in laboratories. Its patented technology is used by researchers in academia and drug development companies to maintain living cells in a nutrient flow. The technology, often referred to as ‘organ on a plate’, provides a way to model the behaviour of multiple human organs interconnected by a flow system that mimics the flow of blood in the body. Introducing flow into cell culture has the benefit that the cells are more active and respond to stimuli (such as dosing with a drug or chemical) in a way that is more predictive of what is likely to happen in a clinical environment. Kirkstall’s products are already being used by researchers in the development of drugs, nutraceuticals, cosmetics and personal care products. By enabling the testing of drugs on living tissue, there is the potential to greatly reduce the need for expensive animal testing and improve the chances of success in human clinical trials. In the quarter ended 30 September 2016, sales of Quasi VivoTM exceeded management forecasts, particularly in the USA, where Kirkstall is represented by Triangular Research Labs (part of Lonza Group, one of the world's leading suppliers to the Pharma & Biotech and Specialty Ingredient markets). Portfolio In addition to our new strategic investments we also have investments in a further 12 companies that were made by Braveheart from 2002 until the summer of 2015 (the “Portfolio”) and we also have a holding in an AIM listed company which we obtained when we acquired Ridings Holdings Ltd in January 2016. We commented in our Annual Report that we undertook a detailed review of the exit opportunities for each company in the Portfolio, with a view to ensuring that these investments were appropriately valued and to also ensure that wherever possible an exit from the investment would be sought. We were therefore pleased to announce on 16 September 2016, that the sale of our holdings in mLED Limited to a large US based technology company had completed. This sale generated £399,000 of consideration for the Group, with £76,000 held back in escrow, and resulted in a book profit to the Group of £303,000 of which £33,000 relates to a non-controlling interest. As at 30 September 2016 the Portfolio had a valuation of £238,000 (30 September 2015: £362,000). We will continue to manage the Portfolio with a view to seeking exits wherever possible and appropriate. Strathtay Ventures We reported in our Annual Report for the year ended 31 March 2016 that we had taken the difficult decision to close our Strathtay Ventures private client business. We do not therefore intend to comment on this particular company in future reports to shareholders.
Viking Fund Managers Viking’s main fund management income comes from the Finance Yorkshire Equity Fund (“FYEF”) contract,
but it also provides specialist fund management services to other funds which are in ‘run-out’ mode. This
specialised management work tends to generate enhanced fees in excess of standard fund management fees
due to the intensive nature of this work. We are pleased to be able to report that Viking successfully invested
the additional sums made available to the FYEF, and that we have also now successfully completed the
investment phase of this fund on time. The emphasis for the FYEF is now on portfolio management rather
than in seeking new investments. Viking is seeking to win the management contracts for further funds and
we hope to report further on this in due course.
04 | OVERVIEW | CHIEF EXECUTIVE OFFICER’S STATEMENT
Braveheart Investment Group plc | Half-Yearly Report 2016
Financial Review Revenue was £562,000 in the six months ended 30 September 2016 (2015: £610,000). We have undertaken an interim review of the valuations of the Group’s Investments and have recorded an unrealised gain on the revaluation of these investments of £32,000 (2015: unrealised loss of £724,000). As at 30 September 2016, the fair value of the Group’s investment was £722,000 (31 March 2016: £468,000), which includes the fair value of the unquoted investments of the Portfolio of £238,000, the acquired quoted investment of £166,000 and the Strategic Portfolio of £318,000.
We commented in the Annual Report for the year ended 31 March 2016 that we had been working to reduce our operating costs so that they are less than the operating income and thus enable us to report an operating surplus for the full year. Our operating costs for the period under review were £435,000 (2015: £868,000), a reduction of 50%. We remain confident that our operating costs for the second half of the current year will be similar to those reported for the first half of the year and so having achieved an operating surplus in the first half we remain firmly on course to achieve an improved operating surplus for the full year thereby delivering one of our key full year targets. We are delighted to be able to report that we have achieved a profit before tax for the period under review of £475,000 (2015: loss of £1.039 million). This equates to a profit of 1.67 pence per share and compares well with the loss of 6.23 pence per share that we reported for the full year to 31 March 2016. The key movements in our cash resources over the period under review are accounted for by the operating profit of £129,000 that we have achieved for the period under review, the one exit achieved from the Portfolio which resulted in a cash inflow of £326,000 and the two new investments in our Strategic Portfolio which resulted in a cash outflow of £318,000. These principal movements of cash resulted in the Group having cash as at 30 September 2016 £1.334 million (31 March 2016: £1.263 million).
Outlook The interim profit of £475,000 for the first six months of the current year represents the largest profit achieved since Braveheart’s floatation in 2008 and marks the commencement of a new chapter for our shareholders. The Board believes that the Group’s costs are now firmly under control at a much reduced level from historic levels and with a new entrepreneurial spirit in the Group, we expect that full year results will reflect our continuing progress.
Trevor E Brown
Chief Executive Officer
INTERIM FINANCIAL STATEMENTS AND NOTES | 05 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 September 2016
Braveheart Investment Group plc | Half-Yearly Report 2016
Six months
ended
Six months
ended
Year ended 30 September 30 September 31 March 2016 2015 2016 (unaudited) (unaudited) (audited) Note £’000 £’000 £’000
Revenue 562 610 1,133
Change in fair value of investments 4 32 (724) (1,026)
Movement on contingent consideration/liability
- (57) (57)
Gain on disposal of investment 303 - 138
Finance revenue 13 - 7
Total income 910 (171) 195
Employee benefits expense (275) (457) (1,001)
Impairment of intangible assets - - (372)
Other operating costs (158) (400) (502)
Finance costs (2) (11) (14)
Total costs (435) (868) (1,889)
Profit/(Loss) before tax 475 (1,039) (1,694)
Tax - - -
Profit/(Loss) for the period and total comprehensive income for the period
475 (1,039) (1,694)
Profit/(Loss) attributable to:
Equity holders of the parent 451 (1,039) (1,686)
Non-controlling interest 24 - (8)
475 (1,039) (1,694)
Basic earnings per share Pence Pence Pence
- basic and diluted 1.67 (3.84) (6.23)
06 | INTERIM FINANCIAL STATEMENTS AND NOTES CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 September 2016
Braveheart Investment Group plc | Half-Yearly Report 2016
30 September 30 September 31 March 2016 2015 2016 (unaudited) (unaudited) (audited) Note £’000 £’000 £’000
ASSETS
Non-current assets
Goodwill 3 380 580 380
Investments at fair value through profit or loss 4 722 1,762 468
Investment in limited liability partnership - 5 -
Other receivables 366 91 293
1,468 2,438 1,141
Current assets
Trade and other receivables 186 274 211
Cash and cash equivalents 1,334 260 1,263
1,520 534 1,474
Total assets 2,988 2,972 2,615
LIABILITIES
Current liabilities
Trade and other payables (422) (273) (544)
Contingent consideration/liability (217) (262) (217)
Deferred income (66) (37) (47)
(705) (572) (808)
Non-current liabilities
Borrowings (43) (43) (43)
Other payables (59) - (59)
(102) (43) (102)
Total liabilities (807) (615) (910)
Net assets 2,181 2,357 1,705
EQUITY
Called up share capital 541 541 541
Share premium 1,564 1,564 1,564
Merger reserve 524 524 524
Retained earnings (436) (244) (888)
Equity attributable to owners of the parent 2,193 2,385 1,741
Non-controlling interest (12) (28) (36)
Total equity 2,181 2,357 1,705
INTERIM FINANCIAL STATEMENTS AND NOTES | 07 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 30 September 2016
Braveheart Investment Group plc | Half-Yearly Report 2016
Six months ended
Six months ended
Year ended 30 September 30 September 31 March 2016 2015 2016 (unaudited) (unaudited) (audited) £’000 £’000 £’000
Operating activities Profit/(Loss) before tax 475 (1,039) (1,694)
Adjustments to reconcile profit/(loss) before tax to net cash flows from operating activities
Share-based payments expense 1 8 11
Impairment losses - 172 372
(Increase)/Decrease in the fair value movements of investments (32) 724 1,026
Gain on disposal of equity investments (303) - (55)
Gain on disposal of LLP - - (83)
Interest income (13) - (7)
Increase in trade and other receivables (48) (26) (107)
(Decrease)/Increase in trade and other payables (103) (73) 1
Net cash flow from operating activities (23) (234) (536)
Investing activities
Proceeds from sale of equity investments 399 - 1,075
Proceeds from sale of LLP - - 89
Increase in investments (318) (17) (17)
Repayment of loan notes - 9 147
Acquisition of subsidiary, net of cash acquired - - (4)
Interest received 13 - 7
Net cash flow from investing activities 94 (8) 1,297
Net increase/(decrease) in cash and cash equivalents 71 (242) 761
Cash and cash equivalents at the start of the period 1,263 502 502
Cash and cash equivalents at the end of the period 1,334 260 1,263
08 | INTERIM FINANCIAL STATEMENTS AND NOTES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 30 September 2016
Braveheart Investment Group plc | Half-Yearly Report 2016
Attributable to owners of the Parent
Share
Capital Share
Premium Merger
Reserve Retained Earnings Total
Non-controlling
Interest Total
Equity £’000 £’000 £’000 £’000 £’000 £’000 £’000
At 1 April 2015
(audited) 541 1,564 524 787 3,416 (28) 3,388
Share-based
payments - - - 8 8 - 8
Transactions with
owners - - - 8 8 - 8
Loss and total
comprehensive
income for the period - - - (1,039) (1,039) - (1,039)
At 30 September
2015 (unaudited) 541 1,564 524 (244) 2,385 (28) 2,357
Share-based
payments - - - 3 3 - 3
Transactions with
owners - - - 3 3 - 3
Loss and total
comprehensive
income for the period - - - (647) (647) (8) (655)
At 1 April 2016
(audited) 541 1,564 524 (888) 1,741 (36) 1,705
Share-based
payments - - - 1 1 - 1
Transactions with
owners - - - 1 1 - 1
Profit and total
comprehensive
income for the period - - - 451 451 24 475
At 30 September
2016 (unaudited) 541 1,564 524 (436) 2,193 (12) 2,181
INTERIM FINANCIAL STATEMENTS AND NOTES | 09 NOTES TO THE INTERIM FINANCIAL STATEMENTS
Braveheart Investment Group plc | Half-Yearly Report 2016
1 Basis of preparation
The financial information presented in this half-yearly report constitutes the condensed consolidated
financial statements (the interim financial statements) of Braveheart Investment Group plc (“Braveheart”
or “the Company”), a company incorporated in the United Kingdom and registered in Scotland, and its
subsidiaries (together, “the Group”) for the six months ended 30 September 2016. The interim financial
statements have been prepared in accordance with IAS 34 Interim Financial Reporting and should be read
in conjunction with the Annual Report and Accounts for the year ended 31 March 2016 which have been
prepared in accordance with International Financial Reporting Standards as adopted for use in the EU. The
financial information in this half-yearly report, which was approved by the Board and authorised for issue
on 12 October 2016 is unaudited.
The interim financial statements do not constitute statutory accounts for the purpose of sections 434 and
435 of the Companies Act 2006. The comparative financial information presented herein for the year
ended 31 March 2016 has been extracted from the Group’s Annual Report and Accounts for the year
ended 31 March 2016 which have been delivered to the Registrar of Companies. The Group’s independent
auditor’s report on those accounts was unqualified, did not include references to any matters to which the
auditors drew attention by way of emphasis without qualifying their report and did not contain a
statement under section 498(2) or 498(3) of the Companies Act 2006.
The preparation of the half-yearly report requires management to make judgements, estimates and
assumptions that affect the policies and the reported amounts of assets and liabilities, income and
expenses. The estimates and associated assumptions are based on historical experience and other factors
that are believed to be reasonable under the circumstances, the results of which form the basis of making
judgements about carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates. In preparing this half-yearly report, the significant
judgements made by management in applying the Group’s accounting policies and the key sources of
estimation uncertainty were the same as those applied to the audited consolidated financial statements
for the year ended 31 March 2016.
The interim financial statements have been prepared using the same accounting policies as those applied
by the Group in its audited consolidated financial statements for the year ended 31 March 2016 and which
will form the basis of the 2017 Annual Report. The interim financial statements have been prepared on the
same basis as the financial statements for year ended 31 March 2016 which is on the assumption that the
company is a going concern.
10 | INTERIM FINANCIAL STATEMENTS AND NOTES NOTES TO THE INTERIM FINANCIAL STATEMENTS
Braveheart Investment Group plc | Half-Yearly Report 2016
2 Earnings per share
The basic earnings per share has been calculated by dividing the profit/(loss) for the period attributable to
equity holders of the parent by the weighted average number of ordinary shares in issue during the period.
The calculation of earnings per share is based on the following profit/(loss) and number of shares in issue:
Six months ended Six months ended Year ended 30 Sept 2016 30 Sept 2015 31 Mar 2016 (unaudited) (unaudited) (audited) £’000 £’000 £’000
Profit/(loss) for the period attributable to equity holders of the parent 451 (1,039) (1,686)
Weighted average number of ordinary shares in issue:
- For basic loss per ordinary share 27,055,491 27,055,491 27,055,491 - For diluted loss per ordinary share 27,055,491 27,055,491 27,055,491
There were no potentially dilutive ordinary shares at the period end as the average share price of the
ordinary shares was less than the average exercise price of the share options.
3 Goodwill
VFM Neon Total £’000 £’000 £’000
At 1 April 2015 (audited) 372 380 752
Impairment (172) - (172)
At 30 September 2015 (unaudited) 200 380 580
Impairment (200) - (200)
At 1 April 2016 (audited) - 380 380
At 30 September 2016 (unaudited) - 380 380
The Group assessed the recoverable amount of the above goodwill with Neon’s cash generating units and
determined that goodwill was not impaired.
INTERIM FINANCIAL STATEMENTS AND NOTES | 11 NOTES TO THE INTERIM FINANCIAL STATEMENTS
Braveheart Investment Group plc | Half-Yearly Report 2016
4 Investments at fair value through profit or loss
Level 1 Level 2 Level 3
Equity investments
in quoted companies
Equity investments in unquoted
companies
Debt investments in unquoted
companies
Equity investments in unquoted
companies
Debt investments in unquoted
companies Total
£'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2015 (audited) - - - 2,318 160 2,478 Repayments - - - - (9) (9) Additions at cost - - - - 17 17
Change in Fair Value - - - (714) (10) (724)
At 30 September 2015 (unaudited) - - - 1,604 158 1,762
Disposals/Repayments (1,015) (143) (1,158)
Acquired 166 - - - - 166
Change in Fair Value - - - (287) (15) (302)
At 1 April 2016 (audited) 166 - - 302 - 468
Disposals - - - (96) - (96)
Additions at cost - - - 288 30 318
Change in Fair Value - - - 32 - 32
At 30 September 2016
(unaudited) 166 - - 526 30 722
The accounting policies in regards to valuations in these half-yearly results are the same as those applied
by the Group in its audited consolidated financial statements for the year ended 31 March 2016 and which
will form the basis of the 2017 Annual Report and Accounts. Investments are designated as fair value
through profit or loss and are initially recognised at fair value and any gains or losses arising from
subsequent changes in fair value are presented in profit or loss in the statement of comprehensive income
in the period in which they arise.
The Group classifies its investments using a fair value hierarchy. Classification within the hierarchy has
been determined on the basis of the lowest level input that is significant to the fair value measurement of
the relevant investment as follows:
Level 1 - valued using quoted prices in active markets for identical assets;
Level 2 - valued by reference to valuation techniques using observable inputs other than quoted
prices included within Level 1; and
Level 3 - valued by reference to valuation techniques using inputs that are not based on observable
market data.
12 | INTERIM FINANCIAL STATEMENTS AND NOTES NOTES TO THE INTERIM FINANCIAL STATEMENTS
Braveheart Investment Group plc | Half-Yearly Report 2016
Investments at fair value through profit or loss (continued)
The fair values of quoted investments are based on bid prices in an active market at the reporting date. All
unquoted investments have been classified as Level 3 within the fair value hierarchy, their respective
valuations having been calculated using a number of valuation techniques and assumptions,
notwithstanding that the basis of the valuation methodology used most commonly by the Group is ‘price of
most recent investment’. The use of reasonably possible alternative assumptions has no material effect on
the fair valuation of the related investments. The impact on the fair value of investments if the discount
rate and provision shift by 1% is £1,789 (2015: £11,508).
5 Share capital
30 Sept 2016 30 Sept 2015 31 Mar 2016
(unaudited) (unaudited) (audited)
Authorised £ £ £
33,645,000 ordinary shares of 2 pence each
(30 September 2015: 33,645,000,
31 March 2016: 33,645,000) 672,900 672,900 672,900
Allotted, called up and fully paid
27,055,491 ordinary shares of 2 pence each
(30 September 2015: 27,055,491,
31 March 2016: 27,055,491) 541,109 541,109 541,109
The Company has one class of ordinary shares. All shares carry equal voting rights, equal rights to income
and distribution of assets on liquidation or otherwise, and no right to fixed income.
6 Availability of Interim Results
Shareholder communications
A copy of this report is available on request from the Company’s registered office: 2 Dundee Road, Perth, PH2 7DW.
A copy has also been posted on the Company’s website: www.braveheartinvestmentgroup.co.uk.
COMPANY INFORMATION | 13
Braveheart Investment Group plc | Half-Yearly Report 2016
Directors, Secretary, Registered Office and Advisers
Directors Trevor E Brown, Chief Executive Officer
Jonathan D Freeman BA Hons MBA, Non-executive Director
Andrew T G Burton BSc, Executive Director
Jeremy H Delmar-Morgan MA MSI, Chairman (resigned 31 July 2016)
Secretary Watson Morgan Associates Ltd
Registration number SC247376
Registered office 2 Dundee Road
Perth
PH2 7DW
Telephone +44 (0) 1738 587555
Website www.braveheartgroup.co.uk
Advisers Registrar Solicitors
Capita Asset Services Limited Maclay Murray & Spens LLP
The Registry Quartermile One
34 Beckenham Road 15 Lauriston Place
Beckenham Edinburgh
Kent EH3 9EP
BR3 4TU
Principal Bankers Auditor
HSBC Bank plc Mazars LLP
76 Hanover Street 90 St Vincent Street
Edinburgh Glasgow
EH2 1HQ G2 5UB
Nominated Adviser and Broker Bankers
Allenby Capital Limited Bank of Scotland plc
3 St Helen’s Place Pentland House
London 8 Lochside Avenue
EC3A 6AB Edinburgh
EH12 9DJ
Stock code: BRH
2 Dundee Road
Perth
PH2 7DW
United Kingdom
T: +44 (0) 1738 587 555
F: +44 (0) 1738 587 666
www.braveheartgroup.co.uk